The consequences of limiting shareholder litigation: Evidence from exclusive forum provisions

Jared I. Wilson

Journal of Corporate Finance, 2020, vol. 64, issue C

Abstract: In response to an explosion of shareholder litigation, many firms have adopted exclusive forum provisions which limit lawsuits to courts in a firm's state of incorporation. This paper examines the consequences of a required venue for shareholder litigation. Delaware-incorporated companies experience significant increases in firm value around exogenous events that confirmed the use of a specified forum. Reduced legal costs and the designation of the domicile court as the sole forum to hear shareholder claims contribute to the increase in firm value. Overall, these findings suggest that a required venue for shareholder litigation benefits firms by eliminating multi-jurisdictional lawsuits and reducing the threat of claims with little merit.

Keywords: Shareholder litigation; Corporate governance; Exclusive forum provision (search for similar items in EconPapers)
JEL-codes: G30 G34 K22 K41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:64:y:2020:i:c:s0929119920301565

DOI: 10.1016/j.jcorpfin.2020.101712

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